By: Kelly Anderson
Community banks and credit unions have long known that debit card reward programs and other lucrative checking account benefits are a great service to drive customer acquisition and retention. In response to months of losing droves of customers and negative sentiment revolving around megabanks, many large financial institutions are attempting to draw back customers by offering reward programs tied to debit card purchases.
Some institutions are offering new cards that offer discounts and perks for making purchases with a debit card, SmartMoney reports. However, few big bank cards provide a cash back rewards program, which may be more accessible at credit unions and community banks.
Although some large institutions are trying to implement more reward programs for checking account customers, there are several reasons these offerings may not stack up to those of credit union and community bank programs.
First, many larger institutions with significant assets are hesitant about using their resources to design new rewards programs due to caps and regulations regarding debit card transactions. Because community banks and credit unions are largely exempt from this legislation, they are more able to continue developing their debit card reward programs.
Second, the economic downturn has changed Americans' attitudes regarding reward programs, and consumers are gravitating away from those offering perks and discounts in favor of those extending cash back for purchases. These programs provide tangible and flexible cash rewards that can be used by consumers to pay for groceries, cover weekly gas costs or other practical purposes. A Bankrate.com study reveals that more than 45 percent of offers sent in 2011 were for cash back rewards cards. In addition, three out of five respondents said the prospect of earning "free money" drove their earning and redemption behaviors.
"Cash is more tangible and can be applied to everyday life," Lisa Hronek, senior analyst at Mintel Comperemedia, told Bankrate. "That's why it became more attractive for consumers during and after the recession."
Although large banks are attempting to tempt more customers to return to their ranks, the 2012 Financial Trust Index Survey reveals consumer trust in large banking institutions fell and is expected to continue its descent. Sentiment and perceptions of reliability toward community banks and credit unions, however, rose during the same period.